Making Open Innovation Ecosystems Work: Case Studies in Healthcare

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In the mist of tightening budgets, many government agencies are being asked to deliver innovative solutions to operational and strategic problems. One way to address this dilemma is to participate in open innovation. This report addresses two key components of open innovation:

From Data to Decisions III

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Today’s senior managers are tempted to begin analytics programs before determining the mission-essential questions they are seeking data to answer.  Older data-based analytics efforts often grew out of the discoveries of line employees who made connections and saw patterns in data after receiving new software or hardware that helped them make sense of what they were studying.

Robert Howard: Transforming IT Processes to Better Serve Veterans

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Dr. Jonathan Perlin interview

Friday, December 2nd, 2005 - 20:00
"Healthcare today and in the future really has to be about the patient. The information has to follow the patient. Our system is increasingly designed not to orient around the facility's needs to organize and deliver care, but around the patient's needs."
Radio show date: 
Sat, 12/03/2005
Intro text: 
Perlin discusses how VHA is moving away from provider- and facility-centered healthcare to more patient-centered healthcare that is driven by data and medical evidence. According to Perlin, patient-centered healthcare at VA means care that is not only...
Perlin discusses how VHA is moving away from provider- and facility-centered healthcare to more patient-centered healthcare that is driven by data and medical evidence. According to Perlin, patient-centered healthcare at VA means care that is not only consistent and reliable but also care that is compassionate and that integrates across health and disease.
Complete transcript: 

Tuesday, July 5, 2005

Arlington, Virginia

Mr. Kamensky: Good morning and welcome to The Business of Government Hour. I'm John Kamensky, a senior fellow at the IBM Center for the Business of Government. We created the Center in 1998 to encourage discussion and research into new approaches to improving the management of government.

You can find out more about the Center by visiting us on the web at

The Business of Government Radio Hour features a conversation about management with a government executive who is changing the way government does business. Our special guest this morning is Dr. Jonathan Perlin, the Undersecretary for Health in the Department of Veterans Affairs. In this job he�s also the CEO of the Veterans Health Administration or VHA, which is the largest integrated health system in the U.S.

Good morning, Dr. Perlin.

Mr. Perlin: Good morning John, it�s a delight to be able to chat with you this morning.

Mr. Kamensky: Thank you, and joining us in our conversation, also from IBM, is Vernecia Lee. Good morning, Vernecia.

Ms. Lee: Good morning, John; good morning, Dr. Perlin.

Mr. Perlin: Good morning.

Mr. Kamensky: So let�s ask our first question; can you tell us about the early history of the Veterans Health Administration and its mission and how it became a world renowned leader in healthcare?

Mr. Perlin: Well, this is a great time to answer the question about the history. In fact, this year, July 21st, we celebrate the 75th anniversary of what is now the contemporary Veterans Health Administration. In fact 75 years ago, Herbert Hoover signed an executive order claiming a dedicated health system for the care of veterans.

More recent history was really shaped after World War II, but the true recent history of VA was shaped in the last 10 years. Our conversation this morning�s about transformation and just to kick it off by saying, we are not your father�s VA, we are a new VA that uses state-of-the-art technologies and looks forward to not only celebrating the past but a very exciting future.

Mr. Kamensky: That�s interesting, can you tell us about some of the major programs and services of the Veterans Health Administration?

Mr. Perlin: One of the greatest things about VA is that our mission is so clear. Our mission is derived from President Lincoln�s second inaugural address, wherein he proclaimed the country�s responsibility to �care for those who shall have borne the battle.� And this is really our care, we have one mission, we care for veterans, we care for veterans.

And the Veterans Health Administration actually has four statutory missions. The first is patient care for veterans throughout the country; for illnesses or injuries that are acquired during service or for the other issues that veterans who are eligible for using VA care may have, but we are also the largest contributor of graduate medical education in the country, collectively training over 80,000 health professions trainees a year, through affiliations not only with 107 medical schools, but 1500 schools of health professions.

We are also a large research organization. We do research that is meant to improve the health and well-being of veterans. We have a nearly $1.7 billion research program in basic sciences, in clinical sciences, trials of new medications and those sorts of things. In health services research where we critically examine how healthcare is delivered, importantly in the area of rehabilitation, so we can help veterans achieve their maximum function. And finally our fourth mission is to work with the Department of Defense and provide back-up to the Department of Defense and in fact to the country during times of emergency.

Ms. Lee: Thank you so much. VHA is just a very large organization; can you provide us with a few facts and figures, the number of employees, your budget?

Mr. Perlin: VHA is the nation�s largest integrated health system and the numbers are somewhat staggering. There are 25 million veterans in the country. Today there are 7.6 million veterans who�re enrolled and eligible for care through their enrollment. In any given year, about 5.2 million patients will come to us for care.

We deliver that care across the country through 1300 sites and that includes over a 170 medical centers, over 870 community-based outpatient clinics, 207 Veterans Readjustment Counseling Centers or Vet Centers, a variety of other long term care programs, also home care programs and Telehealth.

Our workforce approaches nearly 200,000 persons. There are 58,000 nurses, 14,500 doctors who work for us directly, plus another 25,000 doctors who are faculty at 107 of the nation�s medical schools. And another 35,000 residents who are doctors in training, who are licensed but completing their training, who are also part of an additional workforce.

So on top of that 200,000, there are approximately another 100,000 health professionals, a 140,000 volunteers; so all told, nearly 450,000 people come through VA in any given year. The budget that provides care for veterans is approximately $30 billion.

Mr. Kamensky: Wow, when you were appointed Undersecretary for Health back in April of this year, could you tell us what you see as your role and the responsibilities of the positions of the Undersecretary for Health?

Mr. Perlin: My first role is that I�m the chief advocate for veterans� health. We have really made it our specialty, our expertise not only to understand military occupational health but the health issues of veterans and this really divides the two groups; first, there are those things that are directly attributable to service.

The unique experiences and exposures of serving in the military, and then there are those things wherein veterans reflect the health issues of the broader population, challenges of ageing successfully, the challenges of chronic illnesses, including, by the way, obesity and diabetes, something that our Secretary, Jim Nicholson, is very passionate about making sure that our nation�s veterans and in fact all of our nation�s citizens are as healthy as can be.

And so advocacy for the veteran, for veterans� health issues, responsible management to make sure that these really substantial resources are utilized as effectively and efficiently, quite simply as I like to characterize it, provide veterans with safe, effective, efficient and compassionate healthcare.

Mr. Kamensky: Well, what positions have you held previously and how did they prepare you to become an Undersecretary?

Mr. Perlin: Well, I feel very fortunate to have had a variety of positions in training. I�m not sure that anyone really has specific preparation for all of the dimensions I mentioned, but I feel very fortunate in training. I�m an internist; I was a specialist in internal medicine, my clinical training, and in fact also have a Ph.D. I did research in molecular neurobiology and I also have a Master of Health Administration, which is like an M.B.A. directed towards the business of healthcare. So I feel very fortunate to have had that formal training.

Most recently, before I became Undersecretary for Health, which required, you know, senatorial confirmation following a nomination by the President, I had served for about 14-1/2 months as the Acting Undersecretary of Health. It was a very, very good on the job training.

Prior to that, I served for two years as the Deputy Undersecretary for Health and I think probably, most important to my preparation for this role is that I was hired into VA central office by Ken Kizer about seven years ago, to lead the Office of Quality and Performance in developing performance measures to help with VHA�s transformation. We measure only pervasively, some would even say obsessively, holding ourselves accountable for high quality outcomes.

Mr. Kamensky: That�s great, that�s a really fascinating background. How is VA becoming the leader in understanding and providing services uniquely related to veterans� health? We�ll ask Dr. Jonathan Perlin, Undersecretary for Health at the Department of Veterans Affairs to explain this to us when the conversation about management continues on The Business of Government Hour.


Mr. Kamensky: Welcome back to The Business of Government Hour. I�m John Kamensky and this morning�s conversation is with Dr. Jonathan Perlin, Undersecretary for Health at the Department of Veterans Affairs. Joining us on our conversation is Vernecia Lee.

Dr. Perlin, I understand that the number of veterans enrolled in receiving care in the VA healthcare system has risen dramatically and continues to rise. What are the numbers now and why are they increasing?

Mr. Perlin: Well, John, the numbers today are out of the 25 million veterans in the country, about 7.6 million are enrolled with us for care. In any given year, about 5.2 million will be patients, and there are a number of reasons that veterans are coming to us. I think, first and foremost is that, as we�d like to say, we�re not your father�s VA.

This is an organization that provides the highest quality healthcare. It�s one of the few places in America where you can go see your doctor, a nurse or pharmacist and they all have your health records electronically, so you don�t have to keep restating what your medical history is or wonder if everyone�s got the information appropriately.

And in fact, I say this not only because I�m proud of it, I�m proud of the employees in VHA and the passion and their dedication to the mission of serving veterans, but we have the ability because we measure our performance in numbers that can be verified, which others have published on, like the RAND organization, that the care in VA is the best that you can get in the country.

In fact, the RAND article, came out in December 21st Annals of Internal Medicine, compared VA care to 12 other healthcare organizations, some of the best in the country, and the RAND doctors, their conclusion, patients from VHA received higher quality care according to broad measure and this was on 348 different indicators of quality, disease prevention and treatment.

So the veterans who are coming to VA know it�s perhaps the best kept secret in the country. Besides that we also know that we�ve changed; we know that it�s tremendously important for veterans to be where veterans are and 10 years ago we were a hospital system, today we�re a health system, there�s much better care because the focus is on health promotion and disease prevention. And this model means that we have many outpatient clinics where we can work with veterans to help them maintain their health and manage chronic diseases.

As well, candidly, we have a very robust prescription benefit, it�s one of the best deals around. So much medicine today is managed with pharmaceutical prescriptions that veterans find the ability to have high quality health system, which has their full electronic health record, which by the way and maybe we can talk about this later, they can now dial into through something called My Healthy Vet, the veteran�s personal health record and put all of that care in a friendly environment that�s oriented towards the needs of veterans together with the pharmaceutical benefits that really round off the care, we think those are the main reasons: Easy access, high quality, good information and a veteran-centric, patient-centric environment.

Ms. Lee: Thank you so much, Dr. Perlin, you�ve just given a lot to think about, you talked about, early in the segment about providing better service, veterans coming first. You also just talked about easy access. I know you have a lot of initiatives within VHA, can you talk to us about CARES?

Mr. Perlin: Well, CARES, thank you, Vernecia, for that question. CARES is one of those great governmental acronyms. It stands for Capital Asset Realignment for Enhanced Services, and my favorite part of this is the ES, enhanced services. In fact, we in the late �90s were accused by the General Accounting Office, not the Government Accountability Office, of spending millions of dollars on maintaining unused space.

And we take care of places for many veterans today as we did a decade ago. We need to make sure that our facilities and our resources are where the veterans are. And so by helping to evaluate some of the sites that were underutilized, we�re able to redirect funds into the areas and needs of today�s veterans.

For example, the secretary and I just were proud to be at the ribbon cutting in Chicago, at the Hines VA Medical Center where we�ve just opened a brand new spinal cord injury and a new blind rehabilitation center. And in fact using the proceeds of closing one of four hospitals, literally, within a few miles of each other in Chicago, we were able to be building a new 300-bed bed tower; 21st century environments for 21st century veterans offering 21st century care.

So CARES is a process wherein we�re evaluating our portfolio and saying, �What is the most effective, most efficient, most patient-centered way to provide the care to veterans?� And in Chicago, the ability to look at ourselves critically and say, okay, four tertiary referral or four major hospitals within a few miles of each other is, I�m sure, less efficient than having fully staffed programs, high enough volumes to provide the highest quality and the proceeds of being able to close one of those facilities allowed us to open, you know, two new specialty care centers, blind rehabilitation and spinal cord injury and begin our way on putting up a new 300-bed tower.

We consider that the down payment on the CARES process, which is looking around throughout the rest of the country with the outcome intended to be just like that, the ES of CARES, the Enhanced Services for veterans.

Ms. Lee: Thank you so much. Can you also -- I know VA is focused on a lot of special interest areas as it relates to veterans health. You talked about spinal cord injury, are there other special emphasis areas that you focus on that you�d like to share with us today?

Mr. Perlin: Well, thank you very much for that question, because the VA, I don�t think it�s perhaps fully appreciated that it�s been the leader in defining a number of fields. Some have to do with rehabilitation of individuals who experience serious injury and service to their country such as spinal cord injury. But VA is also a world leader in blind rehabilitation, as I mentioned.

It�s also a great leader in the care of amputees, amputation technologies in VA are absolutely state-of-the-art. We mentioned some of the things that are being developed. One that I am tremendously excited about, I think most people today know about something called the cochlear implant, which allows people who have damage to their outer ear function to have a chip installed that receives the sound and translates that into electricity that the brain can pick up and translate into hearing.

One of the things that�s going on in Atlanta is development of the artificial retina. And this sounds like science fiction, but it�s real. This is a chip that can be implanted in the eye. And it, actually like a video camera, responds to light and color and shape in the environment and it translates that just like a video camera into an electric signal and that electronic signal goes to the nerves, and lest you think this is science fiction, it�s been implanted in 10 patients with macular degeneration, one of the diseases of an ageing population.

This is VA�s other contribution, beyond expertise in traumatic injury rehabilitation, especially of geriatrics and gerontology really grow up in the care of older people, that specialty really was developed in VA. And one of the areas I�m most proud of is VA�s leadership in mental health care. Mental illness is a societal challenge, and in fact this is a very exciting era.

The President chartered a commission to see what improvements might be made during his administration in the care of individuals with disabilities and this was called the New Freedom Commission. There was a section on metal illness and mental healthcare. And the goals of this commission and our goals in VA are to move our thinking from a model of maintenance of individuals with illness to a model which really has its goal for recovery; reintegration into social roles, and we believe with some of the new developments and new drugs available that we can contribute to the aspirations of helping Americans with challenges to their mental health, regain as much function as possible and sometimes even complete recovery.

Ms. Lee: Thank you, what is evidence based research and how does VHA use it to provide the best possible care to veterans?

Mr. Perlin: Well, Vernecia, thank you very much for the question on evidence based research. It really grows from a concept called evidence based medicine wherein the medical decision-making is made based on formal review of the literature. Now, this is a fairly new approach and that probably sounds a little frightening to those who must be trained before this term, which is about 15 years old, came about -- we always wondered, well, what we were doing previously, random access of medical care?

But in fact evidence based medicine is a discipline where the literature is formally reviewed using criteria to say, okay, how do you weigh this article which looks at, you know, a case report on a patient, with this article which comes from a study of a large number of patients but retrospective, with this article which looks at a large trial where one -- which we call a placebo-controlled randomized trial that where -- where one arm gets the treatment and the other arm doesn�t get the treatment.

And these different types of approaches to research have inherently different power or predictive power in terms of determining how good the treatment, if that�s what�s being studied, is likely to be in a particular population. And so one case report or one individual is obviously very, very different than the power of what we call a double blind placebo-control trial, and the ability to generalize from the one-case report, the entire population is very, very different from all its study.

And so evidence based medicine actually looks at these different types of research and says, �Okay, what is going to be the most successful approach for actually providing care, not in a trial, but to real patients in the real world?� And this is one of the great things about our electronic health record and our clinical decision support is that there are 10,000 new articles a day that go on to the National Library of Medicines index, something that�s available by the way to all consumers as PubMed.

But even to expect your doctor to be able to read 10 articles a day, let alone 10,000, is unrealistic in this information age. And so we need tools where we can synthesize all that literature, so we bring the patient the state-of-the-art care, and that approach is called evidence based medicine, make sure that when we make clinical decisions they�re really backed by the best evidence possible and the electronic health record helps to make that clinical decision support available in real time while the doctor, nurse, or nurse practitioner or a physician�s assistant, or psychologist, or any health professional is actually working with the patient.

Ms. Lee: How is VA moving away from facility-centered healthcare to patient-centered healthcare?

Mr. Perlin: I love that question, because when you go to the doctor or a hospital and you think about where your records are, like most Americans, you probably think they�re scattered all over the country. Your health record, ironically, is hardly about you, and in 2005 it�s more about the institutions that provide the care to you. And that�s really wrong.

Healthcare today and in the future really has to be about the patient; the information has to follow the patient. The information has to be available when the patient wants it and where the patient wants to receive their care, and so our system is increasingly designed not to orient around the facility�s needs and the facility�s means to organize care and the delivery of care, but around the patient�s needs and we hear the term patient-centered care often bantered about, that�s sort of a buzz phrase now for family care.

Let me tell you exactly what I mean when we say patient-centered care at VA. We mean care that normally built-in safety of the system property. We mean care that�s not only consistent and reliable and built-in quality as a system property, we mean care that�s compassionate, care that integrates across health and disease but also across diseases.

Think about the patient with diabetes and heart failure, two diseases that often occur together. And think about that patient, who in 2005 might have in one context, their diabetes managed by an endocrinologist and the diabetes case manager or disease manager and the heart failure managed by a cardiologist to another, this is the same patient.

It�s not very patient centered if you�re having your care in this kind of uncoordinated manner. Our goal is to make sure that the care integrates across health and disease, disease and disease and environmental care, be it the hospital, the clinic, or the home and to facilitate truly patient centered care.

Our electronic health record which exists throughout all of our hospitals and clinics, long-term care settings and even associates with our personal health record, which is available to the patient, the veteran in their home, follows the patient, and that�s really where we�re headed with the health record.

Information is not about the facility, not about the location, not about the disease but about the patient, and that allows all the people who may interact with the patient, wherever and whenever, to really focus on the patient, go for true patient centered care that�s safe, effective, high quality, compassionate care.

Mr. Kamensky: That�s really fascinating, how VA cares for, that�s just very interesting. How has the Veterans Health Administration reduced the number of medical errors? We�ll ask Dr. Jonathan Perlin, Undersecretary for Health of the Department of Veterans Affairs to explain this to us when the conversation about management continues on The Business of Government Hour.


Mr. Kamensky: Welcome back to The Business of Government Hour. I�m John Kamensky and this morning�s conversation is with Dr. Jonathan Perlin, the Undersecretary for Healthcare at the Department of Veterans Affairs. Joining us in our conversation is Vernecia Lee.

Dr. Perlin, in our previous segment we were talking a little bit about how information is following the patient. We were talking also about dialing into -- the patients could actually dial into or get their information online. We�ll talk a little bit more about how the Veterans Health Administration is demonstrating health information technology leadership.

Mr. Perlin: Well, John, thanks for that question. As I mentioned earlier, the VA today, it�s a totally electronic environment. Up until recently I�ve been able to see patients over the Washington VA, I literally never touch paper. And I tell you this because the President�s Information Technology Advisory Committee came out with some fairly compelling, frightening statistics about some of the shortcomings of using this, as the President phrased it, horse and buggy technology in the 21st century.

Do you know that across the United States today, not in VA but across the United States; one in five hospitalizations occur because previous records weren�t available? And every seventh lab test is repeated because previous records weren�t available. When I see patients at the Washington VA or anywhere in VA and have the benefit of the electronic health record, I don�t have to guess why they�re there.

I don�t have to look a woman in the eye who might be there to follow up on a biopsy to rule out cancer and say, �I�m sorry, Ms. Smith, could you tell me why you�re here today?� I have never had that conversation. And I don�t know whether that�s high quality or better safety or better compassion, probably all of the above. But our electronic health record means the records are available 100 percent of the time. And the ability to have this information available means that we�ll first, I mean � if I�ll order a drug that the patient�s allergic to, that information is always there and not only that, if I try to order a medication that the patient is in fact allergic to, a known allergy, it will stop me, say, you really don�t want to do that.

And I will say to the computer, �Thank you, I really didn�t want to do that.� Or a drug that the patient�s lab says is inappropriate. Even better than that there is real time clinical decision support. Say if I see a patient, say, for something as common as high cholesterol, I get a reminder, clinical decision support says, �It�s time for this patient to be screened for high cholesterol.�

And if the number comes back high, and in fact it automatically is put into the next chart note, so I don�t have to remember to go look that up, it�s automatically in the next chart note, it actually fires up another reminder that says, �Hey, Mr. Smith�s cholesterol is high, if you want do something about it, here are some options.� And then it presents me with some options; we talked about evidence-based medicine earlier this morning, and in fact it gives me an option, it�s not just a reasonable option, but the best evidence-based choice for the particular medication. And it goes one step further because we care for over five million veterans. You can imagine our pharmacy bills are pretty high. We want to make sure that we not only have the evidence-based labor, but the most cost effective labor as well.

And so medication has recommended us not only the top notch in terms of their particular class of drugs, but the one that is the least expensive within that class. And with one button, I�ve just had decision support to prevent an error -- error check to prevent an error, decision support to make the best evidence-based choice and better than having to read the hieroglyphics of my typically bad doctor�s handwriting, perhaps, a typically worse -- there is no written record of that, it�s electronic.

Yeah, it can point out a copy of the prescription for the patient, but more importantly within the system that electronic order goes to one of seven computerized mail outpatient pharmacies around the United States. And those mail outpatient pharmacies not only allow us to distribute medications very cost effectively, where our inflation for prescription has been less than an eighth, one-eighth of what the inflation has been outside of VA, allows us to operate with your Six Sigma performance.

The mythical Six Sigma is a failure rate of 3.4 per million. Our success rate is operating right now at 5.85 sigma, and we will push it to Six Sigma. The people elsewhere in medicine ask, �Is Six Sigma applicable to healthcare?� and I would submit the answer is �yes.�

You asked about preventing errors. Maybe I�ll just take a moment and tell you what happens to that same prescription to the patients in one of our hospitals. From the point I put in that electronic order for prescription in the computer, it would go to robotic dispensing in the pharmacy. And when the medication is actually brought to the bed side of the patient, the nurse who administers the medication will actually stand a barcode on the medication or IV, and stand a barcode on the patient�s wrist band making sure 100 percent of the time that it is the right medication in the right dose being delivered by the right person to the right patient at the right time. And that may seem like a large checking and that�s true, and it might seem like much ado about nothing, but let me share with you one of the frightening statistic.

Not in VA hospitals, but across America, one out of every six and a half hospitalizations is affected by a medical error, a medication error, a drug event serious enough to compromise the patient�s condition, increase their length of hospitalization and not surprisingly increase the cost of care. We are taking those errors out of medicine.

Mr. Kamensky: One of the things that I�ve learned in the government service is that a good chunk of success depends on partnering with others. I understand that the Veterans Administration does a lot of partnering with others.

Mr. Perlin: Yes, we do. Partnering is tremendously important and their partnerships really range the gamut. Other federal partners, we partner with the Department of Health and Human Services in terms of fighting this epidemic of obesity and diabetes. The Surgeon General and the Secretary of Health and Human Services really -- leading goal is to help Americans improve their health outcomes by reducing the toll of obesity and diabetes. We�re partnering with the Department of Health and Human Services to make our electronic health record available particularly to unreserved and rural Americans for whom this will be a good record to use.

Partnering with the Department of Defense to make sure veterans, particularly those returning from combat receive seamless care, a continuum of service from the care that they might receive while in active duty to the care that they receive when they come into VA as veterans. We partner with academia. There are 126 medical schools in the country. We�re affiliated with 107 of them. We partner with 1500 schools of health professions education�s programs and this not only advanced knowledge in the country, but it�s also in and above supporting the needs for care within VA, provides health professionals across all disciplines for all of America, particularly important in the era of nursing shortage and a future projected doctor shortage.

And we partner with the private sector. It�s hard to imagine an industry organization in private given the breadth, the expanse of our business with whom we don�t have partnerships. We partner in development of new technologies through rehabilitation, we partner across information technologies to make things like this electronic health record available to veterans and indeed to all other Americans. And so our partnership is really a part of the recipe for success.

Ms. Lee: Thank you so much, Dr. Perlin. You spoke earlier about and mentioned your RAND report. Are there other things that you�re looking at doing in terms of continuing to improve your medical errors and improve patient safety?

Mr.Perlin: Well, Vernecia, thank you very much for the question about the RAND study, and we�re really proud of that because, I�m sure it�s the VA that sets the benchmark for quality in the country today on 348 measures of improving quality and disease prevention and disease treatment. So healthcare has a great way to go. And so this is something that we continue to work on.

I mentioned the bar-coded medication administration and you can imagine that improves the safety and quality of delivering medications. We�re going to be introducing a program where all of our lab tests are bar-coded as well. Let me give you -- just paint a word picture of something that happens throughout hospitals in America, something that I used to do.

When I was a resident in training, we used to go around to our patients in the morning and draw their bloods, in one pocket we had test tubes and in the other we had a label with the patient�s name and identifying information on it. And I hate to frighten listeners but it was remarkable that the labels and test tubes of bloods matched as much as they did. Isn�t there a better way in 2005? The answer is, absolutely.

Doesn�t it make sense that using that same sort of bar-coding that we should have a secure label that securely identifies that this blood sample is from you, as opposed to being from someone else, our electronic health record provides decision support, but increasingly the ability to provide the decision support not just to the healthcare professionals, but importantly to the patient is absolutely critical and the patient will be able -- and is able now to look at health assessments and some patient are able to -- if they have questions about their medications, check medications and even question their doctors and nurses and health professionals in ways that people didn�t think about just a few years ago.

Mr. Kamensky: How are you recruiting, training and retaining employees at the Veterans Health Administration?

Mr. Perlin: Recruitment and training is critically important for a health system of our size as this -- in much of healthcare and one of the great enticements to working in VA is that we have the electronic health record. In fact, formal survey of nurses found that nurses felt safer in their practice of healthcare knowing that there was electronic record and that information didn�t get lost and there were things like the bar-coded medication administration to mean that they weren�t risking giving the wrong medication to a patient.

And so a vibrant high technological environment is one of the features. Secretary Nicholson, I often ask people, what brings you to VA, invariably the answers are the same, first admission, serving veterans. It is so clear that whatever people�s feelings about the world in general, they�re passionate about the care for veterans. Last year is an example when the hurricanes hit Florida and the Southeast, 800 of our employees made themselves available within 24 hours, not only to support veterans but to support communities in Florida and the Gulf Coast. This is the type of people who work for VA, the mission.

Second, is the model of medicine. We practice healthcare, we don�t practice insurance. People who work for VA spend their time caring for the patients, and it�s sort of -- it is a fun environment to work in, and third, the fact that we are the largest provider of health profession�s training, means that there are always lots of vibrant, bright, challenging individuals in the environment. The teachers or the staff absolutely love being at the state-of-the-art in terms of professional knowledge and nursing or medicine or psychology in these training environments and conducting research.

And the derivative of this great environment means that our veterans are getting care that�s important by people who are at the top of their game. So mission, model and teaching research and other environmental attributes like the health record mean that VA really is an employer of choice in healthcare.

Mr. Kamensky: That�s really true. Well, what does the future hold for the Veterans Health Administration? We�ll ask Dr. Jonathan Perlin, Undersecretary for Health at the Department of Veterans Affairs to explain this to us and the conversation that management continues at the The Business of Government Hour.


Mr. Kamensky: Welcome back to the The Business of Government Hour. I�m John Kamensky and this morning�s conversation is with Dr. Jonathan Perlin, the Undersecretary for Health at the Department of Veterans Affairs. Joining us on our conversation is Vernecia Lee.

Dr. Perlin, could you tell us how the veterans� population has changed over time and what it would look like in the future and how this is going to affect the Veterans Health Administration?

Mr. Perlin: Thanks, John, for the question. The veterans� population is relatively stable through 2022 and today they�re about 25 millions veterans. Overall the veterans� population is aging a bit. Sadly, some of the most senior veterans of World War II are beginning to pass away at fairly high rates. But over the next two decades veterans of Korea and the Vietnam War become more senior and about half of the veterans we take care of will be over age 65.

The number of older veterans, those who are over age 85 will triple over the next five years, in that short period of time. As well though, I don�t want people to think that VA is -- it�s just older veterans. In fact, when we look at a picture of today�s military and you realize that 14 percent of the military are women. And in some places as many as 20 percent of our outpatients under 50 are women.

And so when I said earlier on the basis for a transformation of quality that we�re not your father�s VA, we�re also not your father�s VA in terms of the demographics. We take care of lots of veterans and even active duty service members who are in their 20s and 30s and 40s. We take care of women and offer a whole range of age appropriate and gender specific care and we�ve talked to a lot of members about performance, I�m proud to say that VA is the national benchmark in providing breast cancer screening and surgical cancer screening. So we want to make sure that for women we offer the highest quality, age appropriate, gender specific care as well. So in many ways it�s not your father�s VA.

Mr. Kamensky: Well, what do you anticipate in the next five to ten years in terms of what�s going to happen in the Veterans Health Administration?

Mr. Perlin: Well, I think VA doesn�t want to react to the next 10 years. We want to anticipate the next 10 years, and the next ten years in medicine and healthcare are tremendously exciting. I think the rest of the world may catch up to us in terms of the electronic health record. So we actually want to be ahead of the curve and bring these new technologies to veterans. Let me give you some examples of what I think are coming down the pike in healthcare. I think healthcare will be increasingly decentralized. The hospital will be a place that�s really reserved for emergency care and surgery and intensive care.

Much more care will go on in the community. Much more care will be medication oriented. And already if you look around we see, you know, imaging centers and surgical centers. I believe there�ll be blood draw centers and even -- I don�t want to name any named brands, but there are clinics where patients can get care within 30 minutes. And this is in the private sector and I think the healthcare will increasingly decentralize. And what�s so important about that is not only will it be more convenient, but information becomes all the more important in terms of linking all of that information together.

What about the information we bring to the care of patients? We�re into an era where right now, electronic health records can provide decision support, reminders for flu shots, reminders for pneumonia screening, cholesterol checking, the sorts of things I�ve mentioned. The future is even more exciting. The future suggests that now that the human genome has been sequenced, that when I go to my doctor in the future on the basis of my unique genetic makeup, they will be able to make better choices in terms of which medication will work.

And perhaps even more remarkable in terms of which medications to avoid, which ones are going to have bad, perhaps even fatal side effects. In VA, we want to make sure that as our health record matures that we can be there to harness the power of genetic information to make sure that we provide patients with truly personalized healthcare in the future. And so the future is very, very exciting.

About making sure that we build in to the VA health system, system properties: Safety, protecting patients from errors, quality, making sure that the care is consistently reliable, efficiency, making sure that the taxpayers� resources, the veterans� resources are used to provide the maximum health benefit and in terms of making sure that we know why are patients there, being able to use technology in the community to help an older veteran age successfully in home. Maintain not only a community relationship, perhaps, even a spousal relationship of 60 years by supporting them with technologies in their home, we believe we can even build not only safety, effectiveness, efficiency, but compassion, and so the future is just tremendously exciting both for VA and the rest of healthcare.

Ms. Lee: What other goals, Dr. Perlin, would you like to see VHA accomplish and what role do you see IT playing in VHA meeting those goals in the future?

Mr. Perlin: Well, again, the electronic health record information technologies will really be the glue that holds all of information -- all of healthcare together, particularly with the decentralization I was mentioning. But there are so many challenges to current healthcare, that and the ability to combat medical errors, the ability to build in quality and to be truly compassionate, I think, are the aspirations. And being able to harness the power of understanding people�s genetic makeup will be not evolutionary but revolutionary in terms of being able to bring the right treatment to the right patient at the right time.

Ms. Lee: You�re such a visionary; what are some of the future challenges you think VHA would be faced with and how do you plan to address them?

Mr. Perlin: Well, I think the challenge is constant. Our mission is simple; we care for veterans, and whatever the current world events -- like returning for combat veterans and providing the best rehabilitative care to the challenges of healthcare overall. Caring for an aging population, to the challenges of new diseases, and I hope that we never experience an epidemic like SARS. But being able to combat potential epidemics be it an influenza epidemic, VA has to be at the forefront in terms of doing the research, translating that research to clinical practice and making the experience of VA available to all Americans.

As we believe in many instances, electronic health record and performance measurement are model for health policy and improved health outcomes for all Americans. And the opportunity to do that in an environment, we were training tomorrow�s health professionals means that we really can help to provide a service not just to veterans but to the country.

Mr. Kamensky: Dr. Perlin, we always like to close our show with the same question. What advice would you give to a person interested in a career in public service, especially in public health?

Mr. Perlin: Well, the advice I give them is that there is no organization I can think of with a more noble mission in caring for America�s veterans. And we would welcome those people who are visionary and passionate and dedicated and skilled to look at a career in VA. I can tell you that our website is, and on that website you can find employment resources where you can also learn more about VA. You can also learn more about the patients� personal health record, two-thirds of it is available today and full access for patients who are part of our system will be available on Veterans Day, 2005.

And the website for veterans -- not just those who are using VA, but the website for health information and maintaining your personal health record is www.myhealth -- m-y-h-e-a-l-t-h -- And the overall website, -- that's victor alpha for you veterans -- .gov.

Mr. Kamensky: Well, thank you. Vernecia and I want to thank you for fitting us in your busy schedule and joining us this morning. This has been The Business of Government Hour featuring a conversation with Dr. Jonathan Perlin, the Undersecretary for Health at the Veterans Health Administration, which is in the Department of Veterans Affairs.

Be sure to visit us on the web at There you can learn more about of our programs and get a transcript of today�s fascinating conversation. Once again that�s

For The Business of Government Hour, I�m John Kamensky. Thank you for listening.

Dr. Thomas L. Garthwaite interview

Monday, November 29th, 1999 - 20:00
Dr. Thomas L. Garthwaite
Radio show date: 
Mon, 08/21/2000
Intro text: 
Missions and Programs; Organizational Transformation; Strategic Thinking; Leadership; ...
Missions and Programs; Organizational Transformation; Strategic Thinking; Leadership;
Magazine profile: 
Complete transcript: 

Arlington, Virginia

Monday, August 21, 2000

Mr. Lawrence: Good evening, and welcome to the Business of Government Hour: Conversations with Government Leaders. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and the co-chair of the PricewaterhouseCoopers Endowment for The Business of Government. The Endowment was created in 1998 to encourage discussion and research into new approaches to improve government effectiveness. Find out more about the Endowment by visiting us on the Web at

The Business of Government Hour focuses on outstanding government executives who are changing the way government does business. Our special guest tonight is Dr. Thomas Garthwaite, Acting Undersecretary for Health at the Veterans Health Administration.

Recently, the PricewaterhouseCoopers Endowment published two reports on the VHA. The first is called "Transforming Government: The Revitalization of the Veterans Health Administration," and the second, "Transatlantic Experiences in Health Reform: The UK's National Health Service and the U.S. Veterans Health Administration."

Tonight, we want to find out more about the VHA's transformation and reform. Welcome, Dr. Garthwaite.

Dr. Garthwaite: Good evening, it's a pleasure to be here.

Mr. Lawrence: And joining us in our conversation is another PwC partner, Greg Greben. Welcome, Greg.

Mr. Greben: Good evening.

Mr. Lawrence: Well, Dr. Garthwaite, as Acting Undersecretary for Health, you're the chief executive officer of the VHA, the nation's largest integrated health care system. Can you tell us about the VHA?

Dr. Garthwaite: Sure. The VA is strikingly large - it has a budget of about $19 billion, and provides health care to veterans through approximately 180,000 staff, 172 medical centers, over 650 ambulatory care and community-based clinics, 134 nursing homes, 40 domiciliaries, 206 readjustment counseling centers, and various other facilities.

In addition to its medical care mission, we provide a significant amount of graduate medical education and it's said that over half of the doctors in America have had some part of their training in a VA facility.

In addition, we're one of the nation's largest research organizations and do approximately $1 billion in combined research across the country. And finally, we back up the Department of Defense and the National Disaster Medical System in times of emergency.

Mr. Lawrence: Your career with VA is quite long, dating back to 1976, what changes have you observed in the 25 years?

Dr. Garthwaite: I even did a little bit of my residency training in VA, so it goes back slightly further than that. It's interesting to think about all the changes in medicine during that time and the changes in VA.

Clearly, the VA used to be predominantly an inpatient health care system, and over the last 20 years, but especially in the last five years, we've moved to provide a significant amount of care in the outpatient setting. At one time, about 30-some percent of our surgical procedures were done in an outpatient setting; we're closing in on 80 percent of our surgical procedures as an outpatient.

We've gone through changing reimbursement schemes. When DRGs came in the private sector and Medicare in the mid-'80s, about a year after that, the VA adopted a reimbursement scheme.

It was originally called Resource Allocation Model, it became known as RAM. And it worked variably well, I think, in the VA, but ultimately kind of pushed us to do too much with too little. We were just dividing up a fixed pie.

We've gradually emerged to a reimbursement scheme that mirrors managed care. We used a larger population base capitation model and that has allowed us to move some dollars around the system and put it more appropriately where veterans live.

We certainly had to adapt to the use of technology and that's a constant across all of health care. A unique part of the VA, I think, has been the emergence of health services research in VA and what we've done in the last few years is try to push health service researchers to communicate better with managers.

You know, managers make a lot of very important decisions and control a lot of dollars and do that with relatively imprecise data often - data that's not subject to statistical scrutiny.

Health services researchers carefully analyze the data, design experiments, apply rigorous statistics, publish it in a journal and often it sits in the journal for many years before anyone acts upon it.

We didn't think that either of those was the ideal state. We really thought that managers should use as much statistical and analytical rigor as researchers and we didn't think researchers should find out important things and not have them acted upon. And we really worked hard to drive together health service research and management and have several major initiatives along that regard.

Another thing that we've done, that I've noticed changing dramatically in the VA, has been the emphasis on prevention. Years ago, I think we waited until the end of a disease and we came in with tubes and scalpels and tried to save the patient at the end-stage of an illness. Last year, we had immunization rates approaching 90 percent for pneumonia and influenza and we believe that in patients who have lung disease, and who are elderly, that every time we give a shot, we not only save lives and prevent hospitalizations, we save $294 with each shot that we give.

So there's a dramatic evolution from care at the end of a disease towards care across -- all the way from detection and prevention of disease, all the way through more aggressive treatment.

The final thing that's I think really dramatically different in the years that I've been in the VA is the emergence of information systems and the VA's really been a leader in information systems dedicated to patient care.

You know, we didn't have to bill for many years, so in the private sector, the computer systems were developed and maintained primarily around billing. Since we weren't billing, we developed and maintained them primarily around the delivery of health care. And if you think about it, ultimately, the most effective and efficient and the highest quality way to deliver health care would be supported by good informag systems around the process of delivering care. So I think we're a little ahead there.

Unfortunately, we had to begin to bill and so we're catching up with the private sector in how to bill, but I think we're ahead in how to use computers to deliver care.

Mr. Lawrence: You served as the chief operating officer of VHA during the greatest period of transformation in the organization's history. Could you tell us about the challenges and the results of this transformation?

Dr. Garthwaite: If you can imagine walking into probably the second-largest bureaucracy in the United States government; at the time we had 205,000 employees and ran a system that was largely centralized, that is, policy came from Washington and although we originally, I think, had some input from advisory groups in Washington, a lot of this was centrally driven policies.

When Dr. Kizer came in and I joined him as his deputy, one of the key underlying tenets of the reorganization and transformation of VA was to decentralize. We believed that, although the broadest policies had to be set in Washington, the implementation of those policies almost certainly has to occur much closer to where the action is out in the field. And although we can see the major policy decisions, the implementation would be quite different in the Bronx than it might be in Boise.

So that was really a challenge. And to do that, we reorganized into 22 networks and each network, then, was responsible for not just the facilities, but the people, the population we were covering within those geographic areas.

That's really a critical change, as well. In the past, it was competing facilities; each trying to have all the programs that were possible in medicine; each trying to have the tertiary care; each trying to have the latest-and-greatest technology. But what was missing was the coordination of care and the preventive medicine, the primary care for the rest of that population before they needed that tertiary care.

So, in the end, what we were able to do was to refocus all of our staff on the concept that it is really about that population, not about the facilities. Now, I don't say we're 100 percent there today, but we've come an awful long way. That is really one of the fundamental tenets.

That also changed us from specialty care to primary care. It changed us from inpatient care to outpatient care. It changed us from end-of-disease care to prevention. So it had dramatic effects just going from a facility-based organization to a population-based organization.

The real key to the change, I think, in making it all happen was the use of performance measurement. And the use of performance measurement did several things for us. One, it forced us to have conversations about what's most important, what the real goal is. Secondly, it forced us to then say, what would be a measure of that. And, third, it said what kind of progress have we made? It gave us an opportunity to chart our progress towards those goals. So, I think, more than anything else, performance measurement really led to the dramatic changes we've seen.

Mr. Lawrence: Interesting. Well, it's time for a break. We'll be right back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and tonight's conversation is with Dr. Thomas Garthwaite, Acting Undersecretary for Health, Veterans Health Administration.

When we closed out the last segment, Dr. Garthwaite, and I wanted to get your perspective on 25 years of government service, what qualities have you observed as key characteristics of good leadership?

Dr. Garthwaite: Well, I guess the thing that stands out to me is, the quality of a good leader is to have clarity of vision, because if you don't have clarity of vision, it's hard to develop a shared vision with all the employees of the organization. I think if you don't have a shared vision with all your employees, you can only get them to go part way towards any goal.

I mean, we really only go where we believe we want to go. We can be ordered to go someplace, and we'll go reluctantly if there's enough of a power structure there, but when we really go enthusiastically somewhere, it's because we see the goal, we agree with that goal and that vision, and that's how we get there. So, to me, the first part is to really have that clarity of vision.

I also believe that people need sound principles and integrity, I think that's a critical piece because no one will follow anybody they don't believe in, and I think that's another critical piece.

Finally, the ability to listen. It's impossible to know everything, but in an organization of 180,000 people, for instance, we have somebody who has a good idea about almost everything. The hard part is to listen. You can find a lot of people who will be quiet while you're speaking, but you find relatively few people who actually listen to what you have to say, incorporate that into thinking and then turn it into a true dialogue with you.

So, I think that's another key piece of leadership, especially in today's society, which I think is moving from a kind of hierarchical command and control structure to more integrated and virtual organizations and more democratic leadership.

Mr. Lawrence: We discussed earlier the reorganization of VHA into the 22 veterans integrated service networks. How do these networks operate and make decisions and what have been the results of this reorganization?

Dr. Garthwaite: It depends a little bit on where you sit, how you believe how they operate. We believe that we've given them a significant amount of authority and control to operate relatively independently. We give them broad national policy. We occasionally step in and try to guide them back on the straight and narrow.

Others haven't been quite as complimentary as that. I think the Congress has been a little concerned that there's a little too much authority and independence. But my take is that they've done very well, given the rapid evolution of an entirely new structure.

One of the things I think has helped us a lot in moving forward the networks was that during the early implementation, and even to this day, we meet frequently. We have a monthly leadership board meeting with the key headquarters leadership and the network directors, all 22.

We did that monthly, in person, for the first several years, and I think that helped minimize the competition and maximize the collaboration. I think it helped each learn from each other's mistakes and implementation difficulties. I think that really allowed us to do reasonably well in the implementation networks.

Mr. Lawrence: VHA places a strong emphasis on patient safety and has created four patient safety centers of inquiry. Could you tell us about these centers?

Dr. Garthwaite: Sure. The centers are really part of a comprehensive strategy in patient safety. Probably three or four years ago, we looked at what was happening in health care and challenges we had in providing consistent care across all the facilities that we operate and began to take on a systematic approach to improving outpatient safety, which included an advisory group to help set up the program; a center for patient safety; a handbook; a mandatory reporting system; the Centers for Patient Safety and, more recently, a voluntary reporting system.

The Centers are looking specifically at what we can to do to engineer in safety in health care. And they look at things from human factors analysis - Do we have enough people? Are they overtired? Are the machines too confusing? Are they designed to be easy to use or is a mistake almost inevitable based on the design of those things?

In addition, we're looking at things like the role of the environment on worker performance; things like simulations. We have an anesthesia simulator in Palo Alto, where a team from an operating room can go in and this simulated patient can have all sorts of difficulty and even die in front of the doctors and nurses, if the right actions aren't taken. Now, when I say die, I mean, figuratively. But you can simulate almost everything and you can watch and even record on TV all the interactions of the people and the kind of things they need during an emergency and whether they're there.

It's really led to some, I think some important understandings about how teams work together; how teams function in emergencies; and how to provide the needed tools to respond to an emergency in a better fashion than they would when they started the simulations.

In addition, we can also see if people are up to date on their training, know what to do and whether our training needs to be modified to improve that. So, a lot of exciting research and actions being taken in the patient safety arena.

Mr. Lawrence: Related to the area of patient safety, VHA recently launched a three-year $8.2 million program to set up a system to reduce medical errors in conjunction with NASA. Can you tell us more about this?

Dr. Garthwaite: NASA for years has run an aviation safety reporting system, which seeks to minimize the personal inhibitions to reporting close calls or actual errors.

It's been found that if you're involved in an error, an adverse event, or a close call, you make a mistake. You're inhibited by a fear of the consequences if you talk about that. You're also inhibited somewhat by the shame of having to admit you made a mistake. So there's a series of reasons that people aren't quick to point their mistakes.

But most people would like to see the systems get better. They would like to see the situation they found themselves in where a mistake was possible, be fixed. And so, it's been found that if you can make the culture right, the people will readily report anonymously the situation that led to this near miss or this adverse event.

That's what we're setting up with NASA. If something happens, you give the wrong medication, but no one was injured but you know they could have been, you can write that up. You have your name and phone number on there. You send it in to NASA; NASA will call you back and make sure they have the story right, so they can interpret it. They will tear your name off and they'll send that back to you.

Then that information about that event is entered into a database, it's computer searchable and NASA has set up computer programs that have allowed them to look for patterns in this description of these adverse events in aviation and we'll be able to use that programming expertise in medical care, as well.

So we're real excited about this. We think it will be the perfect complement to our mandatory reporting system where an actual adverse event did injure a patient and where we need to get to the root cause of that.

In addition, we'll have this voluntary reporting system that will get to near misses, minor adverse events that might otherwise go undetected and allow us to identify as many possible vulnerabilities in the system so we can get about the business of fixing them.

Mr. Lawrence: Well, it's time for a break. We'll be right back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and tonight's conversation is with Dr. Thomas Garthwaite, Acting Undersecretary for Health, Veterans Health Administration and joining me in the conversation, another PwC partner, Greg Greben.

I wanted to close on one last thing we were talking about in the last segment, which is, one of the innovations under discussion at VHA is Web pages for individual patients to store their medical information electronically in a single place and I'm wondering about the hurdles that need to be overcome before that becomes a reality.

Dr. Garthwaite: Our vision is that the only person that really owns the complete medical record is the patient and the people the patient gives permission to own it. So that, as the VA health care system, we would have all the records on an individual that we had created during our care for the patient; anything they ask us to use in the assessment of their care and the delivery of their care.

Once you make that sort of leap into the patient owns the record, then you have to start talking about how do you, where does he store it, or she store it?

Our vision is that we might help provide veterans that opportunity of a place to store it, especially for the patients that use us for the predominant part of their medical care. So we see a Web page or something like that, a very secure place where electronically the data can come together and where the security is tightly controlled and where the access is controlled by the patient's wishes.

We call that Healthy Vet for the main Web site area, where they can get health information and have their records stored, and right now using the name Healthy Vault for where it's stored, because, in a way, we want to think the medical record as stored every bit as securely as your money and your other valuables.

So that, to us, is a key piece of future. The neat part about this is, once you have your medical record electronically, then instead of this very hard to read, nonstandard information on paper, you now have something that you can analyze much more readily; that you can share much more readily; that you can get a second opinion on much more readily. And you can begin to group together with other patients and look across patients inwardly at the health care system and ask what kinds of quality outcomes does that health care system have.

So when I talk to people about the revolution in the electronics and information in health care, it's not so much just about the fancy stuff people can do, which is, move or do telemedicine, and teleconsultation and a variety of other things.

I think the real revolution will come when the patients own the record and can band together and hire somebody to help them pick the providers, because suddenly, for the first time, capitalism will really rain down and health care will force people to provide quality that they can demonstrate and not demonstrate to themselves or to an accrediting body, but demonstrate to a group of consumers who are looking in at them. That will, I think, dramatically change for the better, our health care system.

Mr. Lawrence: Well, what about the privacy concerns of having all that information? I imagine that's a big hurdle to overcome.

Dr. Garthwaite: I think privacy concerns are a hurdle but I think they're much less of a hurdle, if you go into it with the fundamental belief that the patient owns the data. So that the patient wouldn't join a consortium that they didn't want to.

The patient's data wouldn't go to a pharmaceutical company to market to them their newest products. It wouldn't go to a health care organization just because they had contact with a health care organization. You'd have to specify that you want to share all your record with that health care organization.

And so, if the patient owns the record, I don't think that it will get out of whack. It's when the hospital sells to the pharmaceutical company who then comes back and markets their medications and begin to sell these databases for other reasons that there are really going to be concerns, or if someone from an insurance company can come in and exclude from coverage people who have certain diseases or conditions.

I think those kind of things are the fear that drive the privacy concerns. As long as the patient owns that record and the other people that have parts of that record aren't allowed to sell that information off, I think the rights and privacy of the patient can easily be protected.

Mr. Greben: We've discussed some of the complexities of VHA: The sheer size, the number of facilities, et cetera, as well as the various missions: medical care, medical graduate education, and research. How do you manage such a complex organization?

Dr. Garthwaite: Wish I knew. Well, you obviously have to get a lot of people involved and we've tried a couple of things. We've tried to hire the smartest people we could from wherever they are. In the past, the VA was, I think, guilty of being a little insular and hiring from within. We have hired whoever we could find we thought could do the best job. So, we've hired a significant number of our leaders from outside the VA and I think that's been helpful.

A second piece that I think is helpful in management is the development of the performance measurement monitoring system. We've been able to focus people on key measurements that we think really reflect our progress, both as facilities but also as a larger system.

By picking things to monitor and to measure that are critically important to patients, we've turned the focus of what your job is from the old days, where it was kind of impressing the person higher than you are in the hierarchy to now making some measurable change in the life of a veteran, their immunization rates, their surgical mortality, the number who are put on aspirin and beta blockers after a heart attack. You go down the list, the customer or patient satisfaction scores for your facility.

All those things that we measure, you're going to have to change how you do the process of care and make it better to make them change. So that's made for a lot of focus in local facilities and nationally, on how to make that happen, which is all about the process of delivering care and I think it's made us a much better organization.

Mr. Lawrence: How does VHA attract, hire, and retain top performers, especially in the area of quality health care?

Dr. Garthwaite: Well, that's getting harder and harder. One thing we have on our side is we have a wonderful mission. It's pretty noble to take care of America's heroes, do research, train tomorrow's health care providers. But altruism only goes so far, if the salary structure isn't any good. So we've tried to make sure that our salary is the best that we can make it within the current legislative mandates that we have.

We also try to challenge our employees. We want them to feel like it's fun to come to work. We want them to feel that it's challenging to come to work, that it's a good thing that they have a noble mission.

We'd also like them to believe that, for working with the VA, they will grow as professionals and as people, that they will have an opportunity to learn things and at their level of confidence and the things that they know that are marketable inside the VA, and outside the VA, will grow as they've come on.

I would say we have a lot of work to do in this area. Although that's a belief system we have and although we've taken some significant steps in that regard, I think that's a part that's lagged a little behind and is a major initiative that I've started working on in my new capacity.

Mr. Greben: How has VHA handled reductions in staff?

Dr. Garthwaite: Most of our reductions have been through attrition. We've proposed some involuntary separations, or as the government calls them, reductions in force, or RIFs, but we've ended up separating relatively few people via that mechanism. We've used buy-outs, early retirements, and general turnover to try to restructure the workforce.

One thing that doesn't show up on our FTE statistics has been the use of contracting, and in many areas where we've put in community-based outpatient clinics, we've ended up contracting for services. And so, there are several additional FTEs that are contracted for. That's a different way of doing business for us.

Mr. Lawrence: You described a period of tremendous change in VHA. How have you worked with the unions, during this period?

Dr. Garthwaite: We've had a national union partnership that I think has helped get national issues out on the table and debated. We've sought local partnerships in all of our facilities and I'd say the vast majority have working and relatively good union partnerships.

Clearly, there are some areas where we still have either no partnership or less than ideal partnerships with the union, but we continue to try to work through those areas individually.

But I think, overall, our record's been pretty good. We've brought the union into our national meetings. We've brought them in to advisory boards at the national and local level and we've also sought their opinion as we send out policies.

Our instinct is to send out all our policies during development for comment to all the stakeholders that are important to us.

Mr. Greben: VHA has launched many new initiatives and changes in the recent past, can you describe some of these initiatives and specifically comment on the challenges that you faced?

Dr. Garthwaite: Yes. We've had an incredible number of things we've tried to put into place. For example, a recent one has been implementing bar code medication administration. We've asked that all the medications that are given in the VA health care systems are checked by bar code between the drug itself, the medical record and the bar code that's on the patient, so that it's the right drug, it's the right dose, it's the right time, and it's the right person.

The challenge with that, especially, has been vendor problems getting the stuff on time, technical issues, but incredibly, trying to teach every nurse who gives out a medication across our large system to go with the new technology has been especially challenging.

Mr. Lawrence: Well, it's time for a break. We'll be right back with more of The Business of Government Hour. (Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I'm Paul Lawrence, a partner at PricewaterhouseCoopers and tonight's conversation is with Dr. Thomas Garthwaite, Acting Undersecretary for Health, the Veterans Health Administration and joining me is another PwC partner, Greg Greben.

We were just closing out the last segment talking about the new initiatives and changes. Want to continue?

Dr. Garthwaite: Right, in addition to the bar coding, we've had to do a variety of other things, from computerized patient record to pain as the fifth vital sign, to implementing reasonable charges in our billing system.

I know the latter one has been especially challenging because we have no culture for billing so we've had to train coders, we've had to train clinicians to document in the chart. We've had to train others to make sure the codes are correct and justified by that documentation. Then to get the bills out, to make sure they're collected and all that process is pretty hard when you start, really, from ground zero.

Mr. Greben: What do you think are the major challenges that VHA will face going forward?

Dr. Garthwaite: Well, you know, I often see more challenges ahead than others because I've been fighting the current challenges and have a sense of those. Clearly, the emergence of technology and how to use it, how to deploy it, how to pay for it, how to kind of get over the hump from the old technology to the new technology safely, and efficiently and effectively is certainly a challenge.

That's both computers, but also fancy diagnostic machinery, and fancy therapeutic machinery, and new medications, and genetic testing, and all those sort of things.

I see huge issues in workforce, from challenges to competition for workers with the wonderful economy that we're experiencing, finding people that want to go into health care and nursing and a variety of the professions that health care has been challenging. That competition for workers has an upward pressure on pay.

All of the government workers have been noted to be getting older and being closing in on retirement, so there's some very special issues related to the federal government and the retirement systems and the age of the average government worker and that's even worse in VA for nurses. Some real issues in workforce for us.

We have huge infrastructure issues. We have a lot more buildings than we need but it's not a simple process to talk about closing those and it's not a cheap issue to think about how to take them down and how to restructure our infrastructure to meet the needs of today's veterans.

There are clearly some veteran demographic issues. In the future, around 2010, there's a significant drop off in the number of veterans in the United States and we anticipate a drop off in the need for medical care by veterans. So one has to either imagine a different, or emerging role for the VA health care system, or significant changes in its size and scope.

Our sense is that it's been a real investment for the taxpayer to build this large system. It provides some valuable functions in addition to providing the health care and its research and education missions and that there are potential other roles that will provide taxpayer value on their investment.

The good news is that, by reinventing and transforming the VA, I think the potential roles that the VA could take on in the future have expanded. I mean, I think five years ago, one wouldn't look to a large lumbering bureaucracy that couldn't demonstrate the quality of care that it gives for any new tasks. But, today, I think you have a much leaner VA that's very responsive, that's high technology, that's high touch, that can demonstrate to anybody who wants to look, the kind of quality-of-care we're capable of providing. We're having trouble finding systems out there that have benchmark performance measures as good as ours. So I think that we have the potential of really being a model system and one that also provides valuable service in research and education.

Mr. Lawrence: When you change the way you do business, there tends to be resistance. How have you dealt with this and what advice would you give other leaders of change?

Dr. Garthwaite: Well, I'm not sure how well we've done in overcoming resistance. I would say, for sure, we've seen resistance. Clearly, our strategy has revolved around the traditional things, such as communication, where everyone tries to convince people that the change is for good reason; that to share the successes frequently, often, and to try to maintain an upbeat attitude about why the change is necessary. I think we've done that reasonably well, but I think that we still have a significant amount of resistance.

The unique aspect to the VA is that we've changed dramatically at a time when health care's changing dramatically, as well. Part of our strategy has been to remind folks within the VA to talk to their colleagues in other health care systems to understand that it isn't all just VA changing, but all of health care is undergoing dramatic change.

Most recently, we're really trying to arm our employees with some information about the quality measures that have changed so dramatically and so we've given all our employees a little folding card that essentially tells them the key positives about the transformation that we've used to sell the improvement in quality.

The fun part about that is that we did that and the Veterans Canteen Service, which operates all our cafeterias across the system saw that and said, "Hey, that's a great idea," so they made tray liners that have that on it and they printed 4 million tray liners. Sometimes when you're sitting back, you have an idea, you never know how it's going to be taken by other parts of the organization and operationalized.

I think the important point is that you've got to give people a reason to change. You have to make sure that they understand the importance of that change and that it makes sense to them. I think by and large what we've tried to make changes in, has made sense. We've tried to say, you know, everyone should get immunized, why aren't they? Everyone should get these medications, why don't they? Patients should feel that we're compassionate and courteous, why don't they and how do we get better at that over time?

If you define those goals carefully, I think most people get on board with them if they see the same vision and I think if you keep your focus on the patient they usually do.

Mr. Lawrence: How about advice for the people working in the organization, for the managers or leaders of the future in terms of dealing with this new environment?

Dr. Garthwaite: Well, again, I would just go back to a very simple premise. You know, I think in a previous presidential election, I think the phrase, "It's the economy, stupid," was used and I tell people, "It's the patient, stupid." If you really focused in on the patient, if you're worried about their waiting times and if you're worried about our communication with them, if you design systems that make sense to the patient, then you're going in the right direction.

Whereas, if you just say well, we have to preserve this old structure that we've had for so many years because my goal in life was to be the assistant chief of that structure, that's not the same as saying, you know, it doesn't matter what my title is as long as the patients don't have to wait in line, that they are treated with courtesy and respect, that they get the proper diagnosis and proper treatment.

That's what we're really about as an organization. We're not about creating management structures and titles that people aspire to, we're about creating outcomes that patients care about.

One of my favorite analogies is that when you fly in an airplane, you may not crash, you may get from one point to another, but your satisfaction may not be perfect all the time. And you can imagine what the executives must be measuring in certain airlines versus others. There's one that I used to fly often in which the CEO of the organization knew how long it takes from docking the aircraft at the jetway until the bags appeared on the carousel. Now, that's different than knowing whether or not you had empty seats, because, as you and I know, that if you had empty seats, we're happier, but the CEO's not happier. But we also know, because empty seats mean we're sitting in the middle.

Whereas, you and I can probably predict which airlines actually know and measure how long it takes the carousel to get there, because we're standing down there for a half an hour waiting for our bags to appear. With the airline that I know measures that, you don't wait.

So, the real issue is how do all of our employees really believe and measure things and try to make those change that are important to the patient. So, it's not so important to the patient whether or not the person above you in the hierarchy thinks you're a good person and that you wrote a nice report, they do care if they wait. They do care if they're treated with courtesy. They do care if they get the right medications. They do care about their visit to the medical center. That's what you have to be focused on, always.

Mr. Lawrence: Well, that's a good point to end on. Greg and I want to thank you for spending so much time with us this evening, Dr. Garthwaite. Thanks for joining us.

This has been The Business of Government Hour. To learn more about the Endowment's programs and to obtain copies of the two reports on the VHA, "Transforming Government," and "Transatlantic Experiences in Health Reform," visit us on the Web at See you next week.

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